On February 20, 2026, the United States Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose tariffs. All tariffs imposed under IEEPA are invalid, and the administration has now stopped collecting them as of 12:00 a.m. ET on February 24. However, the decision does not address the question of whether (or how) those who have paid the tariffs will be refunded, in light of the decision that the tariffs were never lawful. If refunds are available, they will be paid to importers, leaving businesses downstream of the importer to rely on other options to share in the refunds once issued.
The refund question remains open
The Supreme Court’s decision did not address refunds or order the government to provide them. A 6-3 majority of the Court held that IEEPA’s language authorizing the president to “regulate…importation” did not permit the president to impose tariffs, as a matter of statutory interpretation and constitutional principle, nor did it address the practical consequences of holding that the tariffs were unlawful from the start. Notably, the principal dissent did explicitly discuss refunds, warning that the process of issuing refunds “is likely to be a mess”—a prediction that the majority did not acknowledge. Refunds are not automatically triggered by the decision: it is up to lower courts to order the correct remedy in light of the Supreme Court’s ruling.
Before the February 20 ruling, the administration repeatedly represented in court that it would not dispute the availability of refunds if it were later found that the tariffs were unlawful. As a result, the Court of International Trade (CIT) held that the administration was “locked in” to that position, being judicially estopped from later arguing that the court could not order the government to process refunds. See AGS Co. Auto Sols. v. U.S. Customs & Border Protection, No. 1:25-cv-00255, 2025 WL 3634261 (Ct. Int’l Trade Dec. 15, 2025). But the government may still attempt to argue that the court should not order refunds. Treasury Secretary Bessent has attempted to limit expectations, stating that working out the timing and mechanisms for refunds could take months or longer, and the administration may be successful in delaying a decision from the CIT on refund processes for some time.
Even if refunds are ultimately available for importers, it remains unclear how broad any refund order will be. U.S. Customs and Border Protection could, voluntarily or by order of the CIT, issue tariff refunds to every importer who paid them. However, refunds could instead be limited to those who follow the prescribed procedures and deadlines for challenging tariff charges and seeking a refund. This would leave businesses that fail to timely exercise their rights without any recourse.
Downstream businesses must rely on contract rights to share in refunds
Per federal regulations, tariff refunds from the government are paid to the importer of record, subject only to rare exceptions. In practice, tariff costs are passed on by importers and are felt broadly by downstream businesses; but the mere fact that a company has paid tariff-related costs does not entitle that company to a refund. Thus, downstream businesses cannot count on obtaining a refund via direct litigation before the CIT challenging the IEEPA tariffs’ validity. Instead, downstream businesses’ recourse is via contract claims against the importer, or other businesses that have charged tariff costs.
A key consequence is that there is no one-size-fits-all remedy for downstream businesses. Available refund relief will depend on the wording of a business’s agreement with the importer or other counterparty, which will naturally vary from case to case. Since the administration began imposing IEEPA tariffs in early February 2025, businesses have negotiated a wide variety of positions on allocating tariff costs between parties and what the consequences of any refund would be. Moreover, contract remedies are likely to be governed by arbitration clauses in the applicable contracts, making it more likely that outcomes will vary rather than being uniform.
What tariff payors need to do now
Downstream businesses should not wait to assess their rights but should engage counsel to review their applicable contracts in counterparty relationships that have involved tariff costs. While companies should monitor the pending decisions on whether and how refunds will be applied, counsel can also help lay the groundwork for downstream refunds: once the available recourse has been analyzed, companies should begin pressing those higher in the import chain to share in forthcoming refunds, with litigation or arbitration as the consequence if satisfactory deals cannot be reached through negotiation.
Client Alert 2026-043